Intrinsic value of Bridgepoint Education - BPI

Previous Close

$8.26

  Intrinsic Value

$1.06

stock screener

  Rating & Target

str. sell

-87%

Previous close

$8.26

 
Intrinsic value

$1.06

 
Up/down potential

-87%

 
Rating

str. sell

We calculate the intrinsic value of BPI stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  488
  499
  512
  526
  542
  560
  579
  600
  622
  646
  671
  698
  727
  758
  791
  826
  862
  901
  942
  985
  1,031
  1,079
  1,130
  1,184
  1,240
  1,299
  1,362
  1,427
  1,497
  1,569
Variable operating expenses, $m
  525
  537
  550
  566
  583
  602
  622
  644
  668
  694
  720
  749
  780
  813
  848
  885
  924
  966
  1,010
  1,056
  1,105
  1,157
  1,211
  1,269
  1,329
  1,393
  1,460
  1,530
  1,604
  1,682
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  525
  537
  550
  566
  583
  602
  622
  644
  668
  694
  720
  749
  780
  813
  848
  885
  924
  966
  1,010
  1,056
  1,105
  1,157
  1,211
  1,269
  1,329
  1,393
  1,460
  1,530
  1,604
  1,682
Operating income, $m
  -37
  -37
  -38
  -39
  -40
  -42
  -43
  -45
  -46
  -48
  -48
  -50
  -52
  -55
  -57
  -59
  -62
  -65
  -68
  -71
  -74
  -78
  -81
  -85
  -89
  -93
  -98
  -103
  -108
  -113
EBITDA, $m
  -31
  -32
  -33
  -34
  -35
  -36
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -48
  -51
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -72
  -76
  -79
  -83
  -87
  -91
  -96
  -100
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  3
  3
  3
  4
  4
  5
  6
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
Earnings before tax, $m
  -37
  -38
  -39
  -40
  -41
  -43
  -45
  -46
  -48
  -50
  -51
  -54
  -56
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -83
  -88
  -92
  -97
  -102
  -107
  -113
  -119
  -125
  -131
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -37
  -38
  -39
  -40
  -41
  -43
  -45
  -46
  -48
  -50
  -51
  -54
  -56
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -83
  -88
  -92
  -97
  -102
  -107
  -113
  -119
  -125
  -131

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  224
  229
  235
  242
  249
  257
  266
  275
  285
  296
  308
  321
  334
  348
  363
  379
  396
  414
  432
  452
  473
  495
  519
  543
  569
  596
  625
  655
  687
  720
Adjusted assets (=assets-cash), $m
  224
  229
  235
  242
  249
  257
  266
  275
  285
  296
  308
  321
  334
  348
  363
  379
  396
  414
  432
  452
  473
  495
  519
  543
  569
  596
  625
  655
  687
  720
Revenue / Adjusted assets
  2.179
  2.179
  2.179
  2.174
  2.177
  2.179
  2.177
  2.182
  2.182
  2.182
  2.179
  2.174
  2.177
  2.178
  2.179
  2.179
  2.177
  2.176
  2.181
  2.179
  2.180
  2.180
  2.177
  2.180
  2.179
  2.180
  2.179
  2.179
  2.179
  2.179
Average production assets, $m
  20
  20
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  38
  39
  41
  43
  45
  47
  50
  52
  54
  57
  60
  63
Working capital, $m
  -92
  -94
  -96
  -99
  -102
  -105
  -109
  -113
  -117
  -121
  -126
  -131
  -137
  -143
  -149
  -155
  -162
  -169
  -177
  -185
  -194
  -203
  -212
  -223
  -233
  -244
  -256
  -268
  -281
  -295
Total debt, $m
  3
  7
  11
  16
  21
  27
  34
  40
  48
  56
  64
  73
  83
  93
  104
  116
  128
  141
  154
  169
  184
  200
  217
  235
  253
  273
  294
  316
  339
  363
Total liabilities, $m
  162
  166
  170
  175
  180
  186
  193
  199
  207
  215
  223
  232
  242
  252
  263
  275
  287
  300
  313
  328
  343
  359
  376
  394
  413
  432
  453
  475
  498
  522
Total equity, $m
  62
  63
  65
  66
  68
  71
  73
  76
  78
  81
  85
  88
  92
  96
  100
  104
  109
  114
  119
  124
  130
  136
  143
  149
  156
  164
  172
  180
  189
  198
Total liabilities and equity, $m
  224
  229
  235
  241
  248
  257
  266
  275
  285
  296
  308
  320
  334
  348
  363
  379
  396
  414
  432
  452
  473
  495
  519
  543
  569
  596
  625
  655
  687
  720
Debt-to-equity ratio
  0.050
  0.110
  0.170
  0.240
  0.310
  0.390
  0.460
  0.530
  0.610
  0.680
  0.760
  0.830
  0.900
  0.970
  1.040
  1.110
  1.170
  1.240
  1.300
  1.360
  1.410
  1.470
  1.520
  1.570
  1.620
  1.670
  1.710
  1.750
  1.790
  1.830
Adjusted equity ratio
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -37
  -38
  -39
  -40
  -41
  -43
  -45
  -46
  -48
  -50
  -51
  -54
  -56
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -83
  -88
  -92
  -97
  -102
  -107
  -113
  -119
  -125
  -131
Depreciation, amort., depletion, $m
  5
  5
  6
  6
  6
  6
  6
  6
  6
  7
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  13
Funds from operations, $m
  -31
  -32
  -33
  -34
  -36
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -56
  -58
  -61
  -65
  -68
  -71
  -75
  -79
  -83
  -87
  -92
  -97
  -102
  -107
  -113
  -119
Change in working capital, $m
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
Cash from operations, $m
  -29
  -30
  -31
  -32
  -33
  -34
  -35
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -60
  -63
  -66
  -70
  -74
  -77
  -81
  -86
  -90
  -95
  -100
  -105
Maintenance CAPEX, $m
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
New CAPEX, $m
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
Cash from investing activities, $m
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -14
  -14
  -15
Free cash flow, $m
  -33
  -34
  -35
  -36
  -37
  -39
  -40
  -42
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -60
  -63
  -66
  -69
  -72
  -76
  -80
  -84
  -89
  -93
  -98
  -103
  -108
  -114
  -120
Issuance/(repayment) of debt, $m
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
Issuance/(repurchase) of shares, $m
  38
  39
  40
  42
  43
  45
  47
  49
  51
  54
  55
  57
  60
  63
  66
  69
  73
  77
  81
  85
  89
  94
  99
  104
  109
  115
  121
  127
  133
  140
Cash from financing (excl. dividends), $m  
  41
  43
  44
  47
  48
  51
  53
  56
  58
  62
  63
  66
  70
  73
  77
  81
  85
  90
  95
  99
  104
  110
  116
  122
  128
  135
  142
  149
  156
  164
Total cash flow (excl. dividends), $m
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  36
  38
  40
  43
  45
Retained Cash Flow (-), $m
  -38
  -39
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -54
  -55
  -57
  -60
  -63
  -66
  -69
  -73
  -77
  -81
  -85
  -89
  -94
  -99
  -104
  -109
  -115
  -121
  -127
  -133
  -140
Prev. year cash balance distribution, $m
  68
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  38
  -31
  -31
  -31
  -32
  -33
  -34
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -61
  -64
  -67
  -71
  -74
  -78
  -82
  -86
  -91
  -96
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  36
  -28
  -27
  -26
  -25
  -24
  -23
  -22
  -21
  -20
  -18
  -17
  -16
  -15
  -13
  -12
  -11
  -10
  -9
  -7
  -6
  -5
  -4
  -4
  -3
  -2
  -2
  -1
  -1
  -1
Current shareholders' claim on cash, %
  73.4
  53.8
  39.3
  28.6
  20.8
  15.1
  10.9
  7.9
  5.7
  4.1
  2.9
  2.1
  1.5
  1.1
  0.8
  0.6
  0.4
  0.3
  0.2
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Bridgepoint Education, Inc. (Bridgepoint) is a provider of postsecondary education services. The Company's academic institutions include Ashford University and University of the Rockies. Bridgepoint's institutions conduct ongoing faculty and student assessment processes, and provide a range of student services. It offers Constellation, its learning platform, Waypoint Outcomes, its assessment software, and its mobile application technology. As of December 31, 2016, its institutions offered over 1,200 courses and over 80 degree programs. Ashford University offers associate's, bachelor's and master's degree programs online. Ashford University comprises four colleges: the Forbes School of Business and Technology, the College of Education, the College of Health, Human Services and Science, and the College of Liberal Arts. University of the Rockies is a graduate institution that offers master's and doctoral degree programs in the social and behavioral sciences.

FINANCIAL RATIOS  of  Bridgepoint Education (BPI)

Valuation Ratios
P/E Ratio -12.8
Price to Sales 0.7
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 34.9
Price to Free Cash Flow 48
Growth Rates
Sales Growth Rate -6.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -40%
Cap. Spend. - 3 Yr. Gr. Rate -38.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -6.2%
Ret/ On Assets - 3 Yr. Avg. -5.9%
Return On Total Capital -10.3%
Ret/ On T. Cap. - 3 Yr. Avg. -9.4%
Return On Equity -10.3%
Return On Equity - 3 Yr. Avg. -9.4%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 49.9%
Gross Margin - 3 Yr. Avg. 49.8%
EBITDA Margin -4.7%
EBITDA Margin - 3 Yr. Avg. -0.7%
Operating Margin -7.6%
Oper. Margin - 3 Yr. Avg. -4.2%
Pre-Tax Margin -7.2%
Pre-Tax Margin - 3 Yr. Avg. -3.9%
Net Profit Margin -5.7%
Net Profit Margin - 3 Yr. Avg. -5.5%
Effective Tax Rate 21.1%
Eff/ Tax Rate - 3 Yr. Avg. -4.3%
Payout Ratio 0%

BPI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BPI stock intrinsic value calculation we used $478.397 million for the last fiscal year's total revenue generated by Bridgepoint Education. The default revenue input number comes from 0001 income statement of Bridgepoint Education. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our BPI stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for BPI is calculated based on our internal credit rating of Bridgepoint Education, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Bridgepoint Education.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of BPI stock the variable cost ratio is equal to 107.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for BPI stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Bridgepoint Education.

Corporate tax rate of 27% is the nominal tax rate for Bridgepoint Education. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the BPI stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for BPI are equal to 4%.

Life of production assets of 3.1 years is the average useful life of capital assets used in Bridgepoint Education operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for BPI is equal to -18.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $128.458 million for Bridgepoint Education - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 26.988 million for Bridgepoint Education is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Bridgepoint Education at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

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▶ Why Bridgepoint Education Shares Skyrocketed Today   [Jul-26-18 12:44PM  Motley Fool]
▶ Bridgepoint: 2Q Earnings Snapshot   [Jul-25-18 05:27PM  Associated Press]
▶ Is It Too Late To Buy Bridgepoint Education Inc (NYSE:BPI)?   [Jun-25-18 11:33AM  Simply Wall St.]
▶ After Obama-Era Crackdown, For-Profit Colleges Seek Nonprofit Status   [May-30-18 08:08PM  The Wall Street Journal]
▶ Bridgepoint: 1Q Earnings Snapshot   [May-01-18 06:17PM  Associated Press]
▶ Is It Too Late To Buy Bridgepoint Education Inc (NYSE:BPI)?   [Mar-15-18 03:10PM  Simply Wall St.]
▶ Bridgepoint reports 4Q loss   [Feb-21-18 06:35PM  Associated Press]

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